Real estate appraisal terms for homeowners
Home appraisal terms may seem out of this world to the layman, which isn’t surprising. Each profession has its share of terms or jargon which we have to learn to work or communicate with them.
If you are planning for an appraisal, here are some common appraiser terms and their meanings to help you understand things better.
Adjustment
The appraiser makes adjustments to the sales price of comparable properties that he/she identifies for equivalency to the subject property based on differences in location, amenities, frontage, living area, construction quality, and acreage. This is where an appraiser’s expertise proves most valuable.
Chattel
It’s personal property that may be included on the subject property but doesn’t affect the appraisal report’s opinion of value.
Comparable or ‘comp’
Nearby properties that are similar to the subject property, have been recently sold and are used as a base for determining the subject property’s fair market value.
Drive-by
An ‘exterior-only examination’ appraisal of the subject property that’s conducted to ascertain the property’s existence, and to ensure there aren’t any external obvious defects or visible damage. This form of appraisal is referred to as a ‘2055’ in Fannie Mae’s form, is why drive-bys are referred to as a ‘2055’.
Fair market value
The fair market value is the amount the willing buyer should have to pay a willing seller in a transaction. The opinion of value the appraiser writes in the appraisal report reflects this value.
GLA
GLA or Gross Living Area is the total above grade floor space in the property, including stairways and closet space that’s determined using exterior wall measurements.
Latent defects
These are defects on the property like termite infestation or structural damage that are not apparent but do affect the fair market value.
MLS
The Multiple Listing Service is created and used mainly by real estate agents. Appraisers pay for access to this information to help in adjustment research and comparison selection.
This is a proprietary listing of all market properties in a particular area and their listing prices, along with records of all recent closed sales and sales prices.
Obsolescence
The presence or absence of features that may make the property undesirable is called functional obsolescence. They may occur because of changes in the surrounding areas, and make the property less desirable. The asset value also reduces with a drop in capabilities or when other more desirable options develop.
Subject
This is a short form of the property being appraised or the ‘subject property’.
Useful life
The time span the property is useful to the owner.
URAR
The acronym for Uniform Residential Appraisal Report, Fannie Mae form 1004, the form lenders need for a full appraisal or a walk-through inspection.
USPAP
It’s the acronym for Uniform Standards of Professional Appraisal Practice that promotes the standards and professionalism in appraisal practice and is usually enacted into state law. The non-governmental entity that was chartered by Congress first implemented it to maintain appraisal standards.
Walk-through
This is an inspection performed for each interior part of the house to estimate its value.